Stocks with market capitalization between $2B and $10B, such as Beijing Capital International Airport Company Limited (SEHK:694) with a size of HK$51.62B, do not attract as much attention from the investing community as do the small-caps and large-caps. Despite this, the two other categories have lagged behind the risk-adjusted returns of commonly ignored mid-cap stocks. This article will examine 694’s financial liquidity and debt levels to get an idea of whether the company can deal with cyclical downturns and maintain funds to accommodate strategic spending for future growth. Don’t forget that this is a general and concentrated examination of Amazon’s financial health, so you should conduct further analysis into 694 here. View our latest analysis for Beijing Capital International Airport

Does 694 generate enough cash through operations?

694’s debt levels have fallen from CN¥11.68B to CN¥10.80B over the last 12 months , which comprises of short- and long-term debt. With this debt payback, the current cash and short-term investment levels stands at CN¥4.53B , ready to deploy into the business. On top of this, 694 has generated cash from operations of CN¥4.61B over the same time period, leading to an operating cash to total debt ratio of 42.68%, signalling that 694’s current level of operating cash is high enough to cover debt. This ratio can also be interpreted as a measure of efficiency as an alternative to return on assets. In 694’s case, it is able to generate 0.43x cash from its debt capital.

Does 694’s liquid assets cover its short-term commitments?

Looking at 694’s most recent CN¥9.21B liabilities, it seems that the business has not maintained a sufficient level of current assets to meet its obligations, with the current ratio last standing at 0.63x, which is below the prudent industry ratio of 3x.

Does 694 face the risk of succumbing to its debt-load?

With debt at 37.87% of equity, 694 may be thought of as appropriately levered. 694 is not taking on too much debt commitment, which may be constraining for future growth. We can test if 694’s debt levels are sustainable by measuring interest payments against earnings of a company. Ideally, earnings before interest and tax (EBIT) should cover net interest by at least three times. For 694, the ratio of 11.09x suggests that interest is comfortably covered, which means that lenders may be inclined to lend more money to the company, as it is seen as safe in terms of payback.

Next Steps:

694’s high cash coverage and appropriate debt levels indicate its ability to utilise its borrowings efficiently in order to generate ample cash flow. However, its lack of liquidity raises questions over current asset management practices for the mid-cap. I admit this is a fairly basic analysis for 694’s financial health. Other important fundamentals need to be considered alongside. I suggest you continue to research Beijing Capital International Airport to get a more holistic view of the stock by looking at: